Estate Agents Hit by New Ban on Fees
For a start, it’s because of them that there’s still a High Street to even talk about – somebody has to manage and find appropriate viable tenants for commercial property units, sometimes at short notice and be an effective liaison between tenants and landlords who might have differing views on matters such as rent levels, length of tenancy and covenants regarding the property use.
They’re constantly upskilling and adapting to technological challenges in an ever-changing market. They constantly have to work unsociable hours to fit in with their clients availability, some of whom never turn up.
They provide an essential commercial service in finding the perfect location for their private clients and helping landlords keep their income stream from drying up.
Yet, they’re often seen as the pantomime villains of the public eye. Don’t believe us? Say “Estate Agent” next time a comedian asks your profession during a show and buckle up for the tidal wave of boos.
Of course there are some bad and incompetent agents that give the profession a bad name but there are in every sector. All this negativity just for trying to help people find a home or location for their business.
They now also face possible large fines for charging for services that are now outlawed following a ban on certain kinds of Lettings fees that came into effect on June 1.
These formed a significant percentage of their income and include extra admin fees, set-up fees or referencing fees for new tenancies. Also now outlawed will be charges for inventory checks, “check-out” fees and professional cleaning charges at the end of the tenancy.
The only fees now chargeable to tenants are:
- Utilities and council tax – if included within the tenancy
- Refundable deposits – capped at five weeks rent if annual rent is less than £50,000 or six weeks rent if greater
- Refundable holding deposits to reserve the property – capped at a weeks rent
- Changes to tenancy agreement requested by the tenant capped at £50 – or reasonable costs – has to be backed up by written evidence from the landlord or agent.
- Early termination of the tenancy requested by the tenant
- Defaults by the tenant – fines for late rent payments or lost keys. These must be “reasonable costs” with evidence given in writing by the landlord or agent
The government are not playing – any agent or landlord found charging fees not covered on this list can be fined £5000 for a first offence and an unlimited fine if the rules are broken again within a five year period.
Needless to say, agents are angry at what they see as the scapegoating of their profession.
David Cox, Chief Executive of ARLA Propertymark, the professional body for letting agents, said: “The lettings sector is worth about £4 billion and employs around 58,000 people all over the country. The Government’s Autumn Statement announcement that it plans to ban letting agent fees was the third big blow in as many years for agents, and exacerbate the threat to the private rented sector; an increasingly important tenure on which millions of people rely.
“For many tenants, buying a property simply isn’t an option, and they must depend on the private rented sector to provide security, good standards and fundamentally, a home. Our findings show that landlords are likely to raise rents as a result of the ban on fees. Those tenants who move least frequently, which tend to be lower-income families, will be worst hit by rent rises. This is ironic and shows that there will be unintended consequences to what, in effect, is a crowd-pleasing, populist policy.”
ARLA commissioned independent research to explore the potential effects of the ban on the market. Amongst the key findings were:
- Tenants will pay an increased rent of £103 per year.
- 20% of the industry’s turnover or £700m will disappear
- Approx. 4000 jobs will be at risk from reduced activity and turnover
As we’ve previously written about, estate and lettings agents are just as vulnerable to insolvency as any other business and losing this revenue stream might be the last straw for some otherwise well run, profitable businesses.
If you’re worried about your business then contact us today to arrange a free consultation to discuss your options. Generally, the earlier you get in touch, the more strategies and tactics are available to you to reboot your balance sheet and get back onto the twin tracks of profitability and growth.